City of Cape Town · 18/03/2013 · City of Cape Town Supply Chain Management Due Diligence Processes and Procedures Stellenbosch Council Chambers Stellenbosch Municipality 13 June

City of Cape Town

Supply Chain Management

Due Diligence Processes and Procedures

Stellenbosch Council Chambers

Stellenbosch Municipality

13 June 2013

Presented by: Danie W Steyn

Introduction

Legal Framework

Processes and Procedures

A Walk Through

Introduction

Legal Framework


A Walk Through

INTRODUCTION: Due Diligence

Presentation by City of Cape Town on

the compliance issues relating to

Municipal SCM Regulation 44 that will

assist with Due Diligence processes.

INTRODUCTION: Due Diligence

Due Diligence?

Processes and procedures to enable

compliance processes that align vendor

database information to all prescribed

legislative requirements.

Introduction

Legal Framework


A Walk Through

Legal Framework

Municipal Supply Chain Management Regulations

SCM Abuse Policy (City of Cape Town)

Regulation 43 Prohibition on awards to persons whose tax matters are

not in order

Regulation 44 Prohibition on awards to persons in the service of the

state

Regulation 45. Award to close family members of persons in the service

of the state (Reporting)

Municipal SCM Regulations

Legal Framework

“Improper conduct” means conduct that tantamount to:

fraud; corruption; favoritism; unfair, irregular and

unlawful practices; misrepresentation on information

submitted in tender documents for the purposes of

procuring a contract with the City;

misrepresentation regarding the contractor’s expertise

and capacity to perform in terms of a contract procured

via the Supply Chain Managing System; breach of a

contract procured via the Supply Chain Managing System

and failure to comply with the Supply Chain Management

System.

CoCT SCM Abuse Policy

Legal Framework

“Fronting (Also referred to as Tokenism or Window dressing) i.e.,

where Historically Disadvantaged People are signed up as fictitious shareholders

or members in essentially Juristic Entities where some or none of the

shareholding or membership, as the case may be, is held by persons other

than Historically Disadvantaged People, and

which Juristic Entities tender for contracts in terms of which substantial financial

benefits and proceeds generated by virtue of such contracts are channeled to

shareholders or members of such Juristic Entities, as the case may be, or to an

alternative Juristic Entity or Entities where some or none of the shareholding or

membership, as the case may be, is held by persons other than Historically

Disadvantaged People who otherwise would not have obtained any financial

benefits or proceeds but for such fictitious shareholders or members of the entity

to whom the contract was awarded;


Legal Framework

"City's Register of Tender and Contract Defaulters"

means any list compiled by the City for purposes of the combating of Abuse

of the Supply Chain Management System in terms of which the persons

reflected on the list are prohibited from being awarded any contract by the

City for the specified period reflected on the list.

Vendor blocked/suspended – controlled by Supplier Management


Legal Framework

“Influencing the Tender Process”

directly, indirectly or tacitly influencing or interfering with the work of

relevant City Officials involved in the tender process in order to influence

the process in order to inter alia:

a) influence the process and/or outcome of a tender;

b) incite breach of confidentiality and/or the offering of bribes

c) cause over and under invoicing;

d) influence the choice of procurement method or technical

standards;

e) influence any City Official in any way which may secure an unfair

advantage during or at any stage of the procurement process.


Legal Framework

Adequate notice of manner of abuse of supply chain

management system

Right to access to information

Administration of hearings

Right to be heard

Oral hearings / onus of proof

Right to request reasons

Criminal proceedings

Informing Provincial Treasury

CoCT SCM Abuse Policy: Legal Processes

Legal Framework

Introduction

Legal Framework


A Walk Through


Data cleansing and preparation Identification Number (ID) used as the common denominator

Verify all ID numbers on database

CoCT did a bulk download from CIPC

Vendor Number/Vendor Name/Company Registration Number

CIPC supplied ID Numbers of all members and their status per

vendor

Upload in database

CoCT continuously update database information by requesting

vendors to update their data by sending them their data list as per

the database.

Return of updated information ± 60%


Data cleansing and preparation

Although we constantly inform vendors that the onus is on

them to update their data and the response is poor.

Accurate data is one of the biggest challenges in every

database management process.

Various processes can and must be in place to ensure

data validity with specific mention of the Identification

Numbers.


CoCT Supplier Database

Vendors on SAP Active

Vendors On SAP

32715 15068

Due Diligence Processes and Procedures Regulation 43

Prohibition on awards to persons whose tax matters are not in order

Tax Clearance Certificate (TCC) expired

CoCT inform vendors 1 month in advance & up at to six months after

BLOCK vendor for ALL new transactions (Daily)

Allow payment for awarded transactions

Only accept ORIGINAL TCC

Fraudulent TCC

Link with SARS to verify suspicious TCC

If fraudulent –

Start the Abuse of the SCM Policy processes

Report to National treasury based on the legal ruling.


Prohibition on awards to persons in the service of the state/ CoCT CoCT devised a SAP comparison report that identifies possible

correlations between the ID Numbers on the vendor database and that

of the HR/Personnel database. (Dependants)

Once detected, HR/Personnel will request a “Declaration of Interest”

from the identified incumbent.

All “Declaration of Interest” are verified by SCM

CIPC report to determine shareholding of the implicated company

Staff member – with shares

Start the Abuse of the SCM Policy processes

Vendor suspended for ALL new transactions

Report to National treasury based on the legal ruling

Due Diligence Processes and Procedures Regulation 45.

Award to close family members of persons in the service of the state (Financial year-end reporting)

CoCT devised a SAP comparison report that identify possible

correlations between the ID Numbers on the vendor database and that

of the HR/Personnel database. (Dependants)

Once detected, HR/Personnel will request a “Declaration of Interest”

from the identified incumbent.

“Declaration of Interest” are verified by SCM through

CIPC report to determine shareholding of the implicated company

Staff member with close family members of persons in the service of

the state

Regulation 45 indicator linked to the vendor on the database to

ease the year-end reporting as per legislation


Prohibition on awards to persons in the service of the state

CoCT, in conjunction with Provincial Treasury, devised a process to

identify possible correlations between the ID Numbers on the vendor

database and that of the PERSAL database.

CoCT forward the required data to Provincial Treasury in the following

format:

ID Number

Municipal Identifier

Vendor Number

Vendor Name

Company Registration Number

Block indicator


Regulation 44 Prohibition on awards to persons in the service of the state

CoCT Comparison Report

__XX9722CAPETOWN01FEEDBACK - 18 March 2013.xlsx






ID Number

Municipal

Identifier Vendor no vendor name

Company

Registration no blocks

5305280671080 1 482 AOC GEOMATICS (PTY) LTD 1969/008161/07 95

5105045583087 1 769 BARLOWORLD TOYOTA (KUILS RIVER) 1946/021661/07 91

5105045583087 1 770 BARLOWORLD TOYOTA (TYGERVALLEY) 1946/021661/07

6003035070086 1 775 BARNO 1993/004616/07

5105045583087 1 780 BARONS BELLVILLE 1946/021661/07

5105045583087 1 782 BARONS CULEMBORG 1946/021661/07

5105045583087 1 783 BARONS N1 CITY 1946/021661/07 91

5603185810088 1 895 ROYALSERVE CLEANING (PTY) LTD 2000/011155/07 95

5609010758087 1 1011 NEDBANK LIMITED 0

6907050320084 1 1011 NEDBANK LIMITED 0

7405270435088 1 1189 BUSINESS CONNEXION (PTY) LTD 1993/003683/07 95

5606065083080 1 1673 CLIFFE DEKKER HOFMEYR INCORPORATED 2008/018923/21

6712050097082 1 2018 DATA AIRCONDITIONING CC 2000/026819/23 95

6712050097082 1 2018 DATA AIRCONDITIONING CC 2000/026819/23 95

6903245277081 1 2080 DE KLERK & VAN GEND ATTORNEYS 1997/016509/21 95

7309285542088 1 2351 DUXBURYS PLANNERS INC 1998/002886/21 95

4709115053086 1 2603 ESKOM HOLDINGS 2002/015527/06

4709115053086 1 2604 ESKOM (BILLING) 2002/015527/06 91

4709115053086 1 2605 ESKOM (BULK ELEC) 2002/015527/06



Information supplied by Provincial Treasury

Today (Date of report)

ORG

ORG Description

ID Number

Full Names

Surname

General Remarks

Service Remarks








Provincial Treasury data manipulation and verification

Select only IN-SERVICE records

Check ID Numbers (PT only check on first 10 digest- last

three may differ)

Remove duplicate and invalid ID Numbers

Confirm via CIPC if the identified incumbent is still listed

as “active” with the company

Once verified as a Regulation 44 case, follow legal

processes


Checking of Suppliers Data Information

against PERSAL System

__SCM Regulation 44 Cover Letter.pdf

__SCM Regulation 44 Cover Letter.pdf



Provincial Treasury:

Required information

__Annexure B.xlsx

Municipal Supplier Information

MANDATORY FIELD 1 MANDATORY FIELD 2 IDENTITY NUMBER MUNICIPAL IDENTIFIER NAME(S) OF DIRECTOR(S) COMPANY NAME

__Annexure B.xlsx



Municipal Identifiers Annexure A.xlsx

__

__Annexure A.xlsx

__Annexure A.xlsx


Frequency of processes

Regulation 43: Daily Prohibition on awards to persons whose tax matters are not in

order

Regulation 44: Monthly Prohibition on awards to persons in the service of the state

Regulation 45. Monthly Award to close family members of persons in the service of the

state


Future requirements

Access to HR database of all municipalities

Direct access to CIPC

Direct access to SARS

Centralised database for verification processes Provincial Treasury National Treasury

Questions

THANKING ALL

Documents

City of Cape Town · 18/03/2013 · City of Cape Town Supply Chain Management Due Diligence Processes and Procedures Stellenbosch Council Chambers Stellenbosch Municipality 13 June